EmailThe equity market got rocked by the vote last week, as doubts were cast on a previously widely-held belief that a fiscal cliff compromise would be reached by January 1.
Newly-(re)elected officials are paying a lot of lip service to the idea that a bipartisan compromise needs to be reached soon, yet market participants are still nervously waiting for those words to turn into action.
President Obama offered his latest thoughts Friday afternoon on the path to compromise. His tone was hopeful, but at the same time resolute in his campaign call that the wealthy will have to pay more in taxes.
The president didn't specify in his speech whether increased taxes for the wealthy would be in the form of a higher income tax rate or through closing tax loopholes and removing certain deductions. Reports attributed later to the White House, however, said the president would veto any bill that extends the Bush-era tax cuts for the top 2% of earners.
The market, which had been sitting on larger gains in front of the president's remarks, faded into the close and ended Friday little changed for the day.
Fiscal cliff discussions between the president, congressional leaders, and business leaders will be ongoing this week. The potential for headline volatility looms large.
The same can be said for developments in the eurozone and specifically surrounding Greece, which approved its austerity budget on Sunday but still awaits word on whether it is going to receive another bailout tranche.
EU finance ministers are meeting today. A decision on Greece, however, will reportedly be deferred until the troika's report on Greece's finances is ready. In the meantime, Greece has a EUR 5 bln debt payment due to the ECB this week that can effectively be said to be "hanging in the balance."
European markets are mixed today, having followed form with Asian markets, which churned on China's better-than-expected trade report (both exports and imports increased in October) and Japan's weaker-than-expected 0.9% decline in third quarter GDP.
Foreign investors, though, are probably attuned mostly to the trading action in the U.S.
That action has been disappointing of late with the S&P 500 down 5.9% since September 14 (the day after QE3 was announced).
There is no economic data today and the bond market is closed in observance of Veterans Day.
Things will pick up as the week progresses. Aside from the fiscal cliff and Greek drama, a number of key economic reports are due -- Retail Sales, PPI, CPI, Empire Manufacturing, Initial Claims, Philadelphia Fed, and Industrial Production -- along with the earnings results from a host of retailers and the minutes for the October FOMC meeting (Wednesday).
The S&P futures are up four points at this juncture, which leaves them about 0.2% above fair value.
That's not a lot of buying conviction following a 3.4% decline over the last three trading sessions, yet that is understandable given the many important loose ends that may or may not be tied up to the market's liking.
